Restructuring Your Business
Changing an established business structure can create tax costs even where the commercial reasons are clear. We advise on reorganisations that achieve your objectives and make appropriate use of reliefs.
Restructuring Your Business
As a business develops, the company structure that worked when it was first established may no longer be suitable. Restructuring a company can become necessary when the owners decide to sell part of the business, or when the existing arrangements are making its operations unnecessarily complicated.
Tax Innovations provides business restructuring advice to established companies, helping them make significant changes without creating unnecessary tax liabilities. The tax implications need to be considered before any restructuring takes place, as transactions that make commercial sense can still result in substantial tax charges if they are not structured correctly.
Separating parts of a business
There may be good reasons to separate one part of a business from another. A company might wish to sell a particular trade without selling the rest of its operations, or place a higher-risk activity into a separate company to protect its other assets.
Depending on the circumstances, this could involve setting up subsidiaries, introducing a holding company or undertaking a company demerger. A demerger can be particularly useful where different shareholders wish to take control of separate parts of an existing business.
Changes in share ownership can also require restructuring. For example, where a major shareholder wishes to leave, the company may be able to purchase their shares. However, there are detailed conditions governing whether the payment is subject to Capital Gains Tax rather than Income Tax.
Getting the structure right before any transaction takes place can make a considerable difference to the tax payable.
There are also tax implications when transferring an existing business into a company. The transfer of business assets can give rise to capital gains tax, although Incorporation Relief may allow the gain to be deferred. From 6th April 2026, this relief must be claimed rather than being given automatically.
Tax Innovations can assess whether incorporation would be beneficial, when it should take place and how the transfer should be carried out.
Reorganising a group of companies
As businesses expand, their corporate structures can become increasingly complicated. New companies may have been formed for activities that have since changed, or existing subsidiaries may no longer serve a useful purpose.
Group restructuring can help simplify these arrangements. It may also be appropriate when expanding into a new area of trade or establishing operations elsewhere in the UK.
There are specific tax rules governing transactions between companies in the same group. Assets can often be transferred between qualifying group companies without an immediate Corporation Tax charge on capital gains. However, subsequent changes in ownership can trigger a tax liability, particularly where a company leaves the group.
Other matters to consider include the treatment of accumulated losses, intercompany transactions and VAT grouping. Business debt restructuring can introduce further complications where loans between connected companies are being written off or reorganised.
Tax implications of restructuring a company
Corporate restructuring can involve several different taxes, depending on the transactions required.
Transfers of business assets may give rise to Corporation Tax on chargeable gains, while changes to share ownership can have Capital Gains Tax or Income Tax implications for the shareholders. Stamp Duty may apply to share transfers, and moving property between companies can also create a Stamp Duty Land Tax liability.
VAT needs consideration too, particularly where a business is being divided or the composition of a VAT group is changing.
Various reliefs are available to allow companies to reorganise without triggering immediate tax liabilities. These include provisions covering company reconstructions, share exchanges and certain demergers. However, the qualifying conditions can be complex, and reliefs that appear to be available at the outset can be lost if the transactions are not carried out correctly.
HMRC clearance for company restructuring
In appropriate cases, it is possible to obtain advance clearance from HMRC confirming the application of particular tax provisions to a proposed reorganisation.
For certain reliefs, there is a statutory clearance process. Where no such provision exists, it may be possible to apply under the non-statutory clearance procedure to obtain HMRC’s view on the tax treatment.
A clearance application is a ‘cards on the table’ moment. Full disclosure of the relevant facts is necessary, and the eventual transaction must correspond with the arrangements presented to HMRC if the clearance is to be relied upon.
Tax Innovations has helped numerous clients with applications for both statutory and non-statutory clearance. We can assess which reliefs may be available and assist with obtaining the appropriate HMRC clearances before the restructuring takes place.
Business restructuring tax advice
We advise established businesses on the tax implications of reorganising their operations and ownership. This includes reviewing existing group structures and working with legal advisers to implement the necessary changes.
Our aim is to ensure that the new arrangements achieve their commercial purpose without creating unnecessary tax liabilities.
If you are considering changes to your company or group structure, contact Tax Innovations for specialist business restructuring tax advice.
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Get in touch today and speak to a member of the Tax Innovations team.
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